Collateral Management - Securities Lending Times

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<strong>Collateral</strong>NewsBanking on changeSLT looks back over recent collateral news, from Euroclear’s ‘<strong>Collateral</strong> Highway’to collateral changes at Morgan Stanley, J.P. Morgan and BNY MellonJENNA JONES REPORTSMorgan Stanley posted $3.7 billion in collateraland other payments after ratings agencyMoody’s downgraded the investment bank’scredit ratings.Morgan Stanley posted $2.9 billion during Q22012, along with an additional $800 million inQ3 after its rating dropped two notches.Reports claimed earlier this year that a threenotchdowngrade could have cost Morgan Stanley$9.6 billion in collateral.Ruth Porat, CFO at Morgan Stanley, said in arecent statement that prior to the ratings cut,clients, particularly in the fixed-income tradingbusiness, held back on doing business withMorgan Stanley as they waited to see whatwould happen.“As this process wore on, we could reallysee—in particular through June—clients“In addition to greater transparency and operationalefficiency, this product enhancement isalso designed to provide clients with increasedconfidence in how their collateral is managed,”said Emily Portney, head of agency clearing,collateral and execution (ACCE) at J.P. Morwerereally taking a wait and see approachbecause it wasn’t really clear where Moody’smight come out.”Porat said that since the downgrade, conditionshave improved and the pace of collateral callsand termination payments has slowed.J.P. Morgan extended its collateral managementproduct to enhance the security and controlthat its clients have over excess collateral inresponse to the billion dollar trading losses thatit announced in Q2 2012.In July, it revealed a Q2 2012 net income of $5billion, but there were “several significant itemsthat affected the quarter’s results—some positively;some negatively”.These included losses of $4.4 billion on thechief investment office’s (CIO’s) synthetic creditportfolio, as well as $1 billion worth of securitiesgains in CIO.4J.P. Morgan’s additional collateral service supportsits clients’ listed derivative and OTCcleared activity, “allowing them to maintain excesscollateral in a depository institution, J.P.Morgan Chase Bank NA, separate from theirclearing broker, and have on-demand reportingand access to their account,” said J.P. Morganin a statement.The service also allows clients to centralise themovement of collateral “as needed” to meetmargin requirements across any clearing broker.This reduces the time that is needed toreconcile accounts, giving clients greater operationalefficiency.www.securitieslendingtimes.com
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Page 1 and 2: SLTSECURITIESLENDINGTIMESCollateral
Page 3: Keeping up with collateralEditorial
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